USDA U.S. Department of Agriculture - November 14, 2002
OIL CROPS YEARBOOK November 14, 2002
October 2002, ERS-OCS-2002
Approved by the World Agricultural Outlook Board
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OIL CROPS YEARBOOK is published annually by the Economic Research Service,
U.S. Department of Agriculture, Washington, DC 20036-5831. This release
contains only the text of the OIL CROPS YEARBOOK--tables and graphics are
not included.
Printed copies of this yearbook will be available from the USDA order desk.
Call, toll-free, 1-800-999-6779 and ask for stock # ERS-OCS-2001, $21.
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Oil Crops Situation and Outlook Yearbook. Market and Trade Economics
Division, Economic Research Service, U.S. Department of Agriculture,
October 2002, OCS-2002.
Contents
Summary
Outlook for 2002/03
U.S. Soybean Review, 2001/02
Situation for Other U.S. Oil Crops
Cottonseed
Peanuts
Sunflowerseed
Other Minor Oilseeds
Other Fats and Oils Highlights
World Oilseed and Protein Meal Situation
World Vegetable Oil Situation
List of Tables
Report Coordinator
Mark Ash
(202) 694-5289
E-mail: MASH@ers.usda.gov
Principal Contributors
Mark Ash (Soybeans, Other Oilseeds, Vegetable Oils)
Erik Dohlman (202) 694-5308 (Peanuts)
Wilma Davis (202) 694-5304 (Statistics)
Editor
Dana Rayl West
Graphics, Table Design & Layout
Wynnice Pointer-Napper
Approved by the World Agricultural Outlook Board. Summary released October
23, 2002. Summaries and full text of Situation and Outlook reports may be
accessed electronically via the ERS website at www.ers.usda.gov/. To order,
call 1-800-999-6779 in the United States or Canada. Other areas please call
(703) 605-6220. Or write ERS-NASS, 5285 Port Royal Road, Springfield, VA
22161.
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DC 20250-9410 or call (202) 720-5964 (voice and TDD). USDA is an equal
opportunity provider and employer.
Summary
U.S. farmers planted 74.1 million acres of soybeans in 2001, 0.2 million
less than the 2000 record. Although U.S. soybean plantings decreased,
harvested area increased to a record 73.0 million acres due to lower
abandonment than in 2000. Gains in both yield and harvested area raised
2001 soybean production to a record 2,891 million bushels.
U.S. soybean exports rose to a record 1,063 million bushels in 2001/02.
U.S. soybean processors used 1,700 million bushels in 2001/02, up 60
million from the year before. Though soybean use slowed somewhat in the
spring quarter, the overall increase in demand reduced year ending stocks
to 208 million bushels from the previous seasons 248 million. Since much
of the crop was marketed in the fall at lower prices, the season-average
price fell to $4.35 per bushel from the 2000/01 average of $4.54 per
bushel.
Domestic soybean meal disappearance rose to 33.0 million short tons in
2001/02, up from 31.6 million the previous year. U.S. soybean meal exports
slipped to 7.6 million tons from 2000/01 exports of 7.7 million. The
season average price of soybean meal slipped to $168 per short ton versus
$174 in 2000/01. Total soybean oil exports swelled to 2,500 million from
1,401 million pounds in 2000/01. The surge in soybean oil demand in the
U.S. and abroad shrank the glut of stocks carried over from the previous
year from 2,877 million pounds to 2,385 million pounds.
U.S. cottonseed production rose to 7.5 million short tons in 2001 from 6.4
million the previous year based on a higher harvested cotton area and
yield. More plentiful seed supplies and stronger cottonseed oil prices
supported domestic cottonseed crushing at about 2.8 million tons, up from
an estimated 2.75 million in 2000/01. Feed and seed consumption expanded
to a record 4.8 million tons versus 3.7 million in 2000/01.
Production of peanuts in 2001 totaled 4,277 million pounds, up 30 percent
from the previous years crop and the largest output since 1992/93.
Planted area for the U.S., at 1.54 million acres, was up less than 1
percent from 2000, but favorable weather throughout the peanut producing
regions reduced abandonment compared to the previous year, and contributed
to record U.S. national average yields. Imports in 2001 fell just 13
million pounds from the year before, to 203 million pounds. The large
harvest boosted food use, exports, and crush, but a large portion was
carried over to the following season as ending stocks grew to a record 1.48
billion pounds, up 35 percent from the 2000 level. Peanut exports
rebounded to 713 million pounds from 527 million the year before, and crush
was up 143 million pounds. Food use climbed a modest 49 million pounds to
2.23 billion, just off the 1989 record of 2.31 billion.
World oilseed production increased to 323.1 million metric tons in 2001/02,
from 313.4 million the previous year. Most of the oilseed gain came from
an expansion in global soybean production, which rose to 183.8 million tons
from 175.1 million in 2000/01. Brazilian soybean output reached a record
43.5 million tons in 2001/02 and Argentinas output increased to 29.5
million tons from 27.8 million in 2000/01. Global soybean exports expanded
from 55.1 million tons in 2000/01 to 55.4 million in 2001/02, while soybean
meal exports grew from 41.1 million tons to 45.1 million. In March, China
agreed to ease implementation of its new regulations on biotech crop
imports, but the lapse of purchases prior to that announcement caused its
2001/02 soybean imports to drop to 10.3 million from 13.2 million tons in
2000/01.
Outlook for 2002/03
2002 U.S. Soybean Crop Less Damaged Than First Indicated
The U.S. Department of Agriculture (USDA) shaved its forecast of 2002
soybean production to 2,654 million bushels in October from the September
estimate of 2,656 million. The lower yield estimates in October for
Indiana, Ohio, North Dakota, and South Dakota were mostly offset by record
yields in Minnesota, Arkansas, and Mississippi. The national average yield
would still be 37.0 bushels per acre and below the 2001 yield of 39.6
bushels. Adding a slightly larger carryover of 208 million bushels to the
crop estimate edged the 2002/03 supply up 9 million bushels from the
September forecast. However, there would still be a sharp 276-million-
bushel reduction from last years record supply.
A brisk pace of South American soybean meal shipments to Europe has been a
drag on U.S. export sales of soybeans, which (as of October 3) were down 8
percent against the previous year. Soybean exports in 2002/03 are forecast
to fall 20 percent to 850 million bushels, which was unchanged from
Septembers forecast. Stocks by September 2003 are also expected to be
less tight (at 175 million bushels) than previously forecast although
smaller than the 2001/02 carryover.
In early October, tropical storms in the Gulf of Mexico pushed a
substantial amount of rain into the Midwest and South, which has delayed
progress of the soybean harvest. As of October 13, just 53 percent of the
U.S. soybean harvest had been collected, compared with the 5-year average
of 63 percent. In spite of a delayed harvest pace, the arrival of new crop
supplies have begun pressuring soybean prices from their summer peak. An
unusually large volume of South American export shipments this fall is also
weighing on world prices. The central Illinois soybean price fell below
$5.20 per bushel in early October, which is down from the September average
of $5.62 yet nearly $1 per bushel higher than a year ago. USDA forecasts
the 2002/03 average farm price slipping to $5.05-$5.95 per bushel from its
September forecast of $5.15-$6.05.
Much smaller expected supplies of sunflowerseed meal and canola meal this
season will reduce the available alternatives for domestic feeding.
Consequently, USDA raised its 2002/03 forecast of soybean meal
disappearance in October by 150,000 short tons to 33.5 million. Yet, the
2001/02 outlook for meal disappearance still represents a modest 1.5-
percent increase over last season. Soybean meal consumption by hogs is
likely to weaken because of a smaller breeding herd and lower farrowing
intentions for this fall and winter. Higher feed costs and a huge level of
unsold meat stocks will moderate production incentives for poultry, as
well. As of August 31, U.S. stocks of red meat and poultry in cold storage
swelled by 30 percent and 28 percent, respectively, from a year earlier.
In contrast, greater domestic consumption and foreign production of soybean
meal may further dim the potential for U.S. soybean meal exports.
Shipments of soybean meal abroad are now anticipated falling to 6.6 million
tons in 2002/03. Soybean meal prices have recently softened to less than
$170 per ton compared with the September average of $185. A lower
marketing year average of $165-$195 per ton is seen compared with the
September forecast of $170-$200.
As with soybean meal, domestic disappearance of soybean oil will also
benefit from a shortfall of competing supplies. Collectively, supplies of
sunflowerseed oil, canola oil, and cottonseed oil are expected to plunge by
approximately 500 million pounds from last year. Thus, U.S. soybean oil
disappearance is forecast rising 2 percent in 2002/03 to 17,350 million
pounds. At the same time, the export pace may slow only slightly to 2,400
million pounds. Ending stocks of soybean oil are projected tightening
further to 1,630 million pounds, the smallest in the last 4 years.
Shrinking vegetable oil supplies are expected to support the soybean oil
price. USDA projects a season average price for soybean oil of 19.0-22.0
cents per pound.
U.S. sunflowerseed production was forecast to drop by nearly one-fourth in
2002 to 2,593 million pounds. Harvested area for sunflowerseed will be
down 10 percent in 2002, but the severe production cut is primarily due to
the drought that hit yields very hard this year. Despite an increase in
production by North Dakota and Minnesota, yields suffered greatly in much
of the Central Plains region. The 2002 average yield is estimated down to
1,118 pounds per acre, which would be the poorest since 1993. To further
complicate matters, the sunflowerseed harvest has also been slowed by
untimely wet weather. As of October 13, 23 percent of the crop had been
harvested compared with the 5-year average of 34 percent.
The implied reduction in oil-type sunflowerseed supplies by nearly 700
million pounds from 2001 will sharply curtail 2002/03 crush and leave scant
season ending stocks. Sunflowerseed oil exports, which may bear the brunt
of the impending shortage, are expected to drop to half of their 2001/02
volume of 465 million pounds. The shortage will maintain a large price
premium for sunflowerseed oil, which may curtail domestic consumption, as
well.
Similarly, canola seed will also be in short supply this year. The nearly
completed 2002 domestic harvest was forecast at 1,586 million pounds, which
would be down 21 percent from 2001. Despite an increase in planted area by
19,000 acres in 2002, harvested canola area fell by 77,000 acres to 1.38
million acres. In North Dakota, which accounts for 91 percent of national
acreage, the average canola yield is forecast falling to 1,150 pounds per
acre versus 1,400 pounds last year. In addition, the poor Canadian canola
crop will restrict availability of imported supplies. Consequently, the
shortage may scale back 2002/03 domestic canola seed crushing by as much as
14 percent. Canadian reductions in crushing will also likely trim U.S.
imports of canola oil and canola meal. U.S. canola oil supplies may
decline nearly 200 million pounds in 2002/03, while there may be nearly
100,000 fewer tons of canola meal available over the next 12 months.
U.S. Soybean Review, 2001/02
Higher 2001 Harvested Area Produced a Bumper Soybean Crop
Expenses to fertilize corn increased $10-$15 per acre in 2001, requiring a
higher corn price to maintain its breakeven level with soybeans. Nitrogen
is a critical nutrient for achieving optimal corn yields, and anhydrous
ammonia is the most widely used source. Tight U.S. supplies for natural
gas, the raw material for producing ammonia, more than doubled prices from
the previous spring. In contrast, soybean plants can obtain nitrogen from
the atmosphere, so the crop needs little application of this input. As a
result, in March 2001 U.S. farmers intended to plant a record 76.7 million
acres of soybeans.
Wet soils delayed 2001 crop planting mainly in Minnesota, Iowa, Wisconsin,
and the Dakotas. Progress improved after some drying in late May, but by
then it was too late for many producers to feasibly plant corn. Soybean
plantings also fell 1.2 million acres from March intentions because the
areas still had not dried out well enough during June. Many producers in
these locations had no alternative but to make crop insurance claims for
prevented planting. In contrast, firm soils helped planting proceed
rapidly in the eastern Corn Belt, boosting acreage 400,000 acres from
previous intentions in Illinois, Ohio, and Michigan.
U.S. farmers planted 74.1 million acres of soybeans in 2001, 0.2 million
less than the 2000 record. Planting increased to records for each of the
top 13 soybean producing States, excluding Arkansas and Missouri. Nearly
all of the additional soybean acreage came at the expense of corn, although
lower durum wheat and barley planting contributed to a 500,000-acre
increase in North Dakota. However, farmers expanded cotton planting in
Arkansas, Mississippi, and Louisiana, which extended the long-term exodus
of soybean production from the Lower Mississippi Valley.
High heat and below-normal rainfall in July affected an area encompassing
most of Iowa, Michigan, southern Minnesota, southern Wisconsin, and
northern Illinois. Earlier dryness in southeastern Missouri and eastern
Arkansas only moderately eased. Rains in late August and early September
helped stabilize soybean conditions. Autumn weather was generally
favorable toward the late-maturing soybean fields in Minnesota and
Wisconsin but earlier weather had already taken a toll on yields. A wide
swath of heavy rains in mid-October stalled harvest progress, except for
some western parts of the Corn Belt. Harvest conditions improved later in
October, though progress lagged in Michigan and Wisconsin.
The 2001 national average yield improved somewhat to 39.6 bushels per acre
from 38.1 bushels the previous year. Despite a lack of rain in some
Midwestern States, favorable conditions in Indiana and throughout the South
produced excellent soybean yields in those areas. Although U.S. soybean
plantings were down, harvested area increased to a record 73.0 million
acres due to lower abandonment than in 2000. Gains in both yield and
harvested area raised 2001 soybean production to a record 2,891 million
bushels.
Soybean Exports Surged with Strong Foreign Demand and Deferred Competition
U.S. soybean exports for 2001/02 began slowly due to a lapse of soybean
shipments to China. Exports to China fell by 42 million bushels in 2001/02
to 155 million. Yet, in spite of the trade disruptions over Chinas
regulations on biotech imports, U.S. shipments of soybeans and soybean meal
to other countries (particularly the European Union (EU), Japan, Canada,
Mexico and Turkey) were quite strong. U.S. exports of soybeans to the EU
were a record 286 million bushels. In Japan, the discovery of cases of mad
cow disease prompted its government to ban feeding of meat and bone meal.
Like the EU a year earlier, substitution of soybean meal and tight world
supplies of rapeseed increased Japans import demand for soybeans, as did a
shift in Japanese beef consumption to pork and poultry. In Canada, poor
oilseed crops also enlarged imports of soybeans and soybean meal from the
United States. Turkeys demand for soybeans was sharply raised by a
shortage of domestic and foreign supplies of sunflowerseed. A new (yet
small) source of import demand came from Cuba, which purchased 2 million
bushels of soybeans, 97,000 tons of soybean meal, and 60 million pounds of
soybean oil from the United States. Two years ago, Congress enacted
legislation allowing cash sales of food and medicine to Cuba, which had
been embargoed for the last 4 decades.
U.S. soybean exports rose to a record 1,063 million bushels in 2001/02.
However, strong demand alone was not enough to generate such robust trade.
U.S. soybean exports experienced the typical seasonal slowdown in the
spring once the new South American crops were harvested. Yet, an unusual
lag in South American soybean shipments and a weaker dollar extended the
strength of U.S. exports through the summer. Producers in both Brazil and
Argentina deferred marketing of soybeans as they anticipated even higher
farm prices with a substantial depreciation of exchange rates.
Between October and June, U.S. processors set a monthly crushing record
every month. Crushers benefited from steady domestic demand for meal and
oil as well as the market disruptions in Argentina, the worlds largest
exporter of soybean products.
Soybean stocks fell rapidly (to 1,336 million bushels on March 1, 2002,
versus 1,404 million a year earlier) because of record crushing and exports
in the first half of 2001/02. Although soybean use slowed somewhat in the
spring quarter, the overall increase in demand reduced year ending stocks
to 208 million bushels from the previous seasons 248 million.
Solid soybean demand rallied prices modestly during January, but prices
weakened late in the month following a perceived improvement in South
American growing conditions. U.S. stocks continued to tighten throughout
the spring and summer months and as dry weather deteriorated new crop
conditions. Thus, soybean cash prices rose above $5.50 per bushel in July,
sharply higher than the April average of $4.56. Since much of the crop was
marketed in the fall at lower prices, the season-average price fell to
$4.35 per bushel from the 2000/01 average of $4.54 per bushel.
Solid Demand for Soybean Meal Tightened Supply
Reasonably inexpensive values for soybean meal aided the profitability of
broiler chicken production and a gradual expansion of the flock size
promoted soybean meal use in 2001/02. Favorable hog prices in mid-2001, as
well as a reduction of more than 300,000 short tons in other oilseed meal
supplies, also encouraged consumption of soybean meal. Domestic meal
disappearance rose to 33.0 million short tons in 2001/02, up from 31.6
million the previous year.
Foreign competition in soybean meal restrained U.S. export growth in
2001/02. U.S. soybean meal exports slipped to 7.6 million tons from
2000/01 exports of 7.7 million. The expansion of output also pressured
meal prices in the first half of 2001/02. The season average price of
soybean meal slipped to $168 per short ton versus $174 in 2000/01.
Central Illinois meal prices grew stronger in March and rallied to $186 per
short ton by August as use drew down soybean stocks and processors scaled
back their summer operations. As a consequence of rising domestic prices,
high transportation costs from Midwestern processors, low-priced Brazilian
exports, and a minimal import tariff, soybean meal imports were practical
for Southeastern poultry producers. U.S. imports of soybean meal more than
doubled to 110,000 short tons for 2001/02 when shipments from Brazil
arrived in the Southeast during the late summer.
Surge in Soybean Oil Demand Trimmed Stock Surplus
An increase in domestic soybean crushing raised 2001/02 soybean oil
production to a record 18,865 million pounds, although the gain was
tempered by a lower oil extraction rate. A record high December crush and
sharply lower soybean oil export shipments caused U.S. soybean oil stocks
to peak in January 2002 at a record 3,039 million pounds. Prices again
slumped to 14.2 cents per pound in February.
While crushers in some foreign countries substituted soybeans for their
loss of high-oil-content oilseeds, the lower yield of oil created foreign
deficits of vegetable oil. Many nations needed oil imports and the higher
relative prices for rapeseed and sunflowerseed oils favored purchases of
soybean oil. For instance, Turkeys imports of U.S. soybean oil (which
were zero in 2000/01) increased to take up the slack in domestic oil output
because of the poor sunflowerseed harvests throughout Europe. U.S.
commercial exports of soybean oil were very competitive in other foreign
markets, as well. High U.S. price premiums over South America during the
summer usually exclude most U.S. sales to India and China. However,
exports to both countries surged in 2002 because of competitive U.S.
prices. Total soybean oil exports swelled to 2.5 billion pounds from 1.4
billion in 2000/01.
Favorably low oil prices continued to encourage a strong rate of domestic
consumption, which rose 4 percent to 16.9 billion pounds. A collective
reduction in the consumption of canola and corn oil by more than 500
million pounds also favored more soybean oil use. The surge in soybean oil
demand in the United States and abroad shrank the glut of stocks carried
over from the previous year from 2,877 million pounds to 2,363 million.
Following a seasonal peak in September 2001, growth in global palm oil
production output slowed in early 2002. Combined with a sharp decline in
world rapeseed and sunflowerseed output, shrinking oil surpluses finally
ended a 3-year slide in vegetable oil prices. Although U.S. soybean oil
prices were still historically low, by March 2002 they began an upward
trend as growth in demand outpaced new supplies. By August, the average
price had strengthened to 20.6 cents per pound. The season average soybean
oil price increased to 16.5 cents per pound from the 2000/01 average of
14.2 cents.
Farm Legislation Enacted New Provisions for Oilseeds
On May 13, President Bush signed into law the Farm Security and Rural
Investment Act (2002 Farm Act), which sets agricultural policy for the next
6 crop years. Among the provisions for oilseeds was a lower marketing
assistance loan rate for soybeans at $5.00 per bushel, which has been $5.26
for the last 5 years. The law established a national weighted average loan
rate for other oilseeds at 9.6 cents per pound for 2002 and 2003 and 9.3
cents for 2004-2007. Based on this average, USDA set 2002 loan rates for
oil-type sunflowerseed at 9.15 cents, non oil-type sunflowerseed at 12.1
cents, safflowerseed at 12.53 cents, canola at 9.49 cents, rapeseed at 9.47
cents, and flaxseed at 6.98 cents. A single loan rate for peanuts was set
at 17.75 cents per pound.
New features of the 2002 Farm Act give farmers who planted oilseeds during
the 1998 through 2001 crop years a one-time option to update farm bases to
reflect cotton, grain and oilseed plantings during 1998-2001 or to add
oilseed acres to existing program bases for cotton and grain. Oilseeds
were excluded in previous legislation from the calculation for decoupled
government payments. Producers still have flexibility to plant other crops
on their cotton, grain, and oilseed bases as the direct and counter-
cyclical payments are decoupled from current plantings. Farms establishing
an oilseed base are eligible for direct payments on soybeans, peanuts, and
other oilseeds of 44 cents per bushel, 1.8 cents per pound, and 0.8 cent
per pound, respectively.
In addition, the 2002 Farm Act provides for oilseed counter-cyclical
payments during low price periods. The counter-cyclical payment rate is
defined as the difference between the target price and the sum of the
direct payment rate and the higher of the 12-month average market price or
the loan rate. The target price is set at $5.80 per bushel for soybeans
and 24.75 cents per pound for peanuts. For other oilseeds, the target
price for the next 2 years is 9.8 cents per pound and 10.1 cents per pound
for 2004-2007. Other oilseeds will not receive counter-cyclical payments
because the loan rate plus the direct payment rate equals or exceeds the
target price throughout the life of the 2002 Farm Act. A farms total
counter-cyclical oilseed payment will be determined from the product of the
payment rate and the farms payment yield times 85 percent of the farms
oilseed base acreage.
The energy title in the legislation also re-authorizes a bioenergy program
for the Commodity Credit Corporation to reimburse biofuel producers the
cost of commodity feedstocks up to $150 million annually. The law
broadened the programs eligible feedstocks to include animal byproducts,
oils and fats, and recycled greases. The title also establishes a new
program for purchases by Federal Government agencies of bio-based products
derived from agricultural materials (such as fats and oils). These
products include adhesives, lubricants, inks, plastics, fuels, solvents and
cleaners. The law mandates that Federal agencies give preference to
purchasing bio-based products whenever they are reasonably available and
priced and they provide performance within normal standards. Funding is
provided for biomass research and education initiatives.
Situation for Other U.S. Oil Crops
Cottonseed
U.S. cottonseed production rose to 7.5 million short tons in 2001 from 6.4
million the previous year based on a higher harvested cotton area and
yield. Although 2001 cotton plantings were up only 100,000 acres from last
year, more normal weather helped harvested acreage increase by at least 1
million acres. Cotton yields generally benefited from the improved
conditions, but the seed-to-lint ratio continued a long-term downward trend
to 742 pounds per bale.
More plentiful seed supplies and stronger cottonseed oil prices supported
domestic cottonseed crushing at about 2.8 million tons, up from an
estimated 2.75 million in 2000/01 (which was the least in 14 years). U.S.
cottonseed exports increased from 235,000 tons to 274,000. However, cattle
feedlots were the primary beneficiary of larger domestic and foreign
supplies of cottonseed. Feed and seed consumption expanded to a record 4.8
million tons versus 3.7 million in 2000/01.
Because of the relatively high level for beginning stocks of cottonseed
oil, demand in 2001/02 was able to outpace the production increase.
Domestic cottonseed oil disappearance improved from 673 million pounds in
2000/01 to 767 million in 2001/02. In addition, U.S. exports to Nicaragua,
South Korea, and Egypt rebounded, helping to boost 2001/02 exports to 160
million pounds from 131 million a year earlier. After oil prices fell last
season to the lowest price level (16.7 cents per pound) in two decades, an
easing of the oil market glut firmed the 2001/02 average cottonseed oil
price to 18.0 cents. U.S. exports of cottonseed meal (at 125,000 tons)
were not as high as in 2000/01, mostly because shipments to Mexico fell to
a more typical volume. Combined with an abundant supply of soybean meal,
the decline in cottonseed meal exports kept pressure on its season average
price, which fell from $143 in 2000/01 to $136 per short ton.
Peanuts
Record Yields Contributed to Bumper 2001 Crop
Production of peanuts in 2001 totaled 4,277 million pounds, up 30 percent
from the previous years crop and the largest output since 1992/93.
Planted area for the U.S., at 1.54 million acres, was up less than 1
percent from 2000, but favorable weather throughout the peanut producing
regions reduced abandonment compared to the previous year, and contributed
to record U.S. national average yields. Harvested area totaled 1.41
million acres, up 5 percent from 2000, and the U.S. yield per harvested
acre averaged 3,029 pounds. This marked an improvement of 585 pounds per
acre compared to the year before, and 146 pounds per acre above the
previous yield record set in 1984. Though the U.S. yield set a new record
high, no individual State surpassed its prior record.
Peanut production in the Southeast (Alabama, Florida, Georgia, and South
Carolina) totaled 2.53 billion pounds, 37 percent greater than 2000.
Though the regions drought continued, heavy rains began easing the
moisture deficit during the spring; and excellent harvest conditions
resulted in yields averaging 3,135 pounds per acre, more than 740 pounds
above the previous year. Production from the Virginia-North Carolina area
totaled 602 million pounds, up 10 percent from 2000. Growers entered the
season with better than average soil moisture levels, and timely rains
throughout the season kept improving the crop. The Southwest crop (New
Mexico, Oklahoma, and Texas) totaled 1.11 billion pounds, up 27 percent
from 2000. Yields in the Southwest averaged 2,787 pounds per acre, 412
pounds above 2000.
Ending Stocks at Record Levels for 2001/02
Although peanut food use, crush, and exports were all up over 2000, the
even larger increase in available supplies during 2001 resulted in
weakening average farm prices, which declined 4 cents to 23.4 cents per
pound in 2001. Total supply in 2001 amounted to 5.58 billion pounds, the
largest level in a decade, backed by the more than 1-billion pound
production increase from the year before. Contributing to the large supply
were beginning stocks of 1.10 billion pounds, down 136 million pounds from
2000 but still fairly large given the previous seasons production
problems. Despite the lower overall farm price, the marketing quota system
maintained the relatively high price for domestic edible peanuts, and
imports remained attractive to those who could acquire peanuts at the lower
(within-quota) tariff rate under the U.S. tariff-rate quota system.
Imports in 2001 fell just 13 million pounds from the year before, to 203
million pounds.
The large harvest boosted food use, exports, and crush, but a large portion
was carried over to the following season as ending stocks grew to a record
1.48 billion pounds, up 35 percent from the 2000 level. Exports rebounded
to 713 million pounds from 527 million the year before, and crush was up
143 million pounds. Food use climbed a modest 49 million pounds to 2.23
billion, just off the 1989 record of 2.31 billion, and continuing the
general upward trend from the 1990s low of 1.99 billion pounds set in 1995.
Another factor behind the large ending stocks figure was the large amount
of peanuts contracted for export that went unsold. Contractors preferred
to hold the peanuts rather than sell them at discounted prices which, based
on Rotterdam prices, were down nearly 25 percent from the year before.
With the increased crush, U.S. peanut oil production rose to 230 million
pounds from 179 million pounds the previous year. Though peanut oil
imports, at 39 million pounds, fell to less than half the previous years
level of 79 million pounds, domestic peanut oil consumption continued its
upward climb, rising more than 2 percent to 250 million poundsthe highest
since 1975. The peanut oil price weakened to 32.6 cents per pound, which
is 2.3 cents below the 2000/01 season average.
Peanut meal production also increased in 2001 to 148,000 short tons from
115,000 in 2000, with virtually all of it consumed domestically. Peanut
meal prices slipped to $114 per short ton, down $8 from the previous years
season average.
2001/02 Marks Last Year of Quota System
In the peanut quota systems final year of operation, the national peanut
poundage quota for the 2001/02 marketing year was set at 1.18 million short
tons (2.360 billion pounds), the same as for previous marketing year. The
quota equaled the estimated quantity of peanuts needed for domestic edible
and related uses, excluding seed, in the 2001 marketing year and allowed
for potential underdeliveries of up to 17,000 short tons. The national
average support price for quota peanuts was announced as $610 per short ton
and the support price for additional peanuts was $132 per short ton, both
unchanged from the previous year.
The signing of the 2002 Farm Act substantially transformed the domestic
policy setting for U.S. peanut growers. Beginning with the 2002/03 crop
year, the 2002 Farm Act eliminates the marketing quota support price
system. Thus, farmers no longer have to own or rent peanut marketing quota
rights to produce for domestic edible consumption. Peanuts are now similar
to program crops such as grains and cottonwith identical marketing loan
provisions available to all peanut producers, regardless of production
history. The marketing assistance loan rate for peanuts has been
established as $355 per ton. The loan repayment rate for peanuts is the
lesser of a) $355 per ton plus interest or b) a USDA-determined rate
designed to minimize loan forfeiture, government-owned stocks, and storage
costs. Alternatively, the producer may forgo the marketing loan and opt
for a loan deficiency payment (LDP) at a payment rate equal to the
difference between the loan rate and the loan repayment rate.
In addition, compensation (a buy-out) is provided to quota holders for
elimination of the peanut quota system, and all farmers with a history of
peanut production during 1998-2001, whether quota holders or not, are
eligible for fixed direct payments and for counter-cyclical payments based
on an established target price. The quota buy-out will be made to quota
owners in five annual installments of $0.11 per pound during fiscal years
2002-06, or the owner may opt to take the entire payment in a lump sum.
The direct payment is $36 per ton of eligible base-period (1998-2001)
production. Eligible production would equal the product of average or
assigned base-period yields and 85 percent of base-period acres planted to
peanuts. The direct payments are made regardless of current prices or the
actual crop planted, as long as the farm remains in approved agricultural
uses.
Counter-cyclical payments are available whenever the USDA-calculated
effective price is less than an established target price. The target price
for peanuts specified in the 2002 Farm Act is $495 per ton for each crop
year 2002-07. The effective price is equal to the sum of 1) the higher of
the national average farm price for the marketing year, or the $355 per ton
national loan rate, and 2) the $36 per ton direct payment rate for peanuts.
The difference between the target price and the effective price is the
payment rate. The payment amount equals the product of the payment rate,
the payment acres (85 percent of base acres), and the counter-cyclical
payment yield. Counter-cyclical payments are not contingent upon current
production of peanuts. Loan repayment rates established by USDA early in
the 2002 crop year have ranged from $331 to $387 per ton for Runner
peanuts, indicating that counter-cyclical payments are likely and marketing
loan benefits possible during 2002/03.
Sunflowerseed
Historically low prices discouraged U.S. sunflower acreage in 2001.
Sunflower plantings dropped to 2.65 million acres, down 97,000 from March
intentions and 187,000 from 2001. Most of the decline occurred in North
Dakota (the top producing State), where planted acreage of oil-type and
confection-type sunflowers declined by 140,000 and 100,000 acres,
respectively. Yields were generally above average, although South Dakota
yields were somewhat lower. National sunflowerseed production fell 125
million pounds to 3,419 million. Production of oil-type varieties was
2,804 million pounds and production of non oil-type was 615 million. With
a significantly smaller stock carryover, 2001/02 supplies fell by 265
million pounds.
Relatively tight world sunflowerseed supplies favored a strong interest by
importers, but the smaller domestic supplies limited the capability to
expand both U.S. exports of sunflowerseed and sunflowerseed oil. Nearly
all of the gains in 2001/02 sunflowerseed exports were in the rapidly
growing foreign confectionery market. A limited supply of oil-type seed
rationed the crushing demand, which fell from 2,036 million pounds to 1,676
million. Even so, ending stocks shrank to 237 million pounds, the smallest
carryout since 1997/98. Prices for sunflowerseed responded by surging to a
season average of $9.75 per hundredweight compared with $6.89 a year
earlier.
The relative scarcity of sunflowerseed oil in 2002 swelled its premium over
soybean oil to nearly 7 cents per pound. The price of sunflowerseed oil
averaged 23.3 cents per pound in 2001/02, which was well above the 2000/01
average of 15.9 cents. Another contributing factor was that an increasing
portion of the oil (about 40 percent in 2001) was derived from premium
priced mid-oleic sunflowerseed varieties. The superior quality attributes
of this oil stabilized its domestic use, which increased slightly to 375
million pounds. In contrast, higher prices deterred foreign purchases
(particularly by Mexico and the Netherlands) and U.S. sunflowerseed oil
exports slumped to 465 million pounds from 545 million in 2000/01. Ending
stocks dwindled to a meager 25 million pounds.
Other Oilseeds
Although U.S. farmers intended to expand 2001 canola plantings by 21
percent to a record 1.9 million acres, plantings fell slightly to 1.5
million because of excessively wet soils in the spring. Consequently, U.S.
canola production increased only 1 million pounds in 2001 to 1,999 million.
Given tight Canadian supplies, U.S. canola seed imports in 2001/02 dropped
to 276 million pounds versus 479 million in 2000/01. Even so, steady
demand from Canadian crushers made the United States a net exporter of
canola seed in 2001/02.
Canadian processors produced less canola oil in 2001/02, helping to raise
its U.S. average premium over soybean oil to an unusually large 9 cents per
pound. In addition, because there were ample domestic supplies of soybean
oil, 2001/02 canola oil imports were trimmed to 1,108 million pounds.
Because export demand for canola oil was a comparatively strong 276 million
pounds, domestic disappearance slumped 14 percent to 1,493 million pounds.
U.S. imports of canola meal in 2001/02 were similarly affected by the short
Canadian crop, which fell by one-fourth to 0.9 million tons.
U.S. safflower acreage fell 13 percent in 2001 to 188,000 acres. Below
average yields also contributed to a cut in safflowerseed production to 242
million pounds, making it the smallest crop since 1983. As a result, crush
and exports of safflowerseed in 2001/02 fell to 190 million and 43 million
pounds, respectively. For safflowerseed oil, a recovery in U.S. shipments
to Japan boosted 2001/02 exports to 40 million pounds.
In contrast to other oilseeds, U.S. flax area rebounded in 2001 with a 9-
percent increase to 585,000 acres, raising flaxseed production to 11.5
million bushels. North Dakota farmers supplied 95 percent of the national
flaxseed crop. Total 2001/02 supplies tightened, however, because imports
slumped to 1.9 million bushels, the lowest volume in 2 decades. At the
same time, a sharp cut in European flaxseed output raised U.S. flaxseed
exports to their largest volume in 30 years at 2.4 million bushels. EU
flaxseed area has declined over the last several years due to a policy
reducing the oilseed area payment. Lower available domestic supplies cut
the crush and tightened ending stocks of U.S. flaxseed.
The national average farm price for flaxseed strengthened to $4.29 per
bushel in 2001/02 compared with $3.30 in 2000/01. Despite the improvement
in farm prices, they were still well below the 2001 marketing loan rate of
$5.21 per bushel. Consequently, farmers obtained nearly $12 million in
marketing loan benefits on the 2001 flaxseed crop.
Other Fats and Oils Highlights
Corn Oil
Corn oil production modestly expanded to 2,459 million pounds in 2001/02
from 2,403 million in 2000/01. Tight world supplies for the closest corn
oil substitutes (sunflowerseed oil and olive oil) encouraged a robust
2001/02 export pace of 1,140 million pounds. Corn oil shipments to Turkey
more than doubled, which were prompted by Turkeys shortage of domestically
produced sunflowerseed oil. Exports to Saudi Arabia, Italy, and Mexico
also increased. These four countries typically comprise about half of U.S.
corn oil exports.
Domestic disappearance of corn oil dropped sharply to 1,345 million pounds
from 1,630 million in 2000/01. In contrast, the consumption data has
increased strongly over the last year. This could be explained if end
users consumed oil from their own stocks purchased at bargain 2001 values.
Two major oil consumers, McDonalds and Frito-Lay, recently announced
decisions to use more corn oil in frying their products because of its
lower trans-fatty acids content.
Similar to the rest of the vegetable oil complex, corn oil prices recovered
from a very low level seen early in 2001. The unusual price discounts that
emerged last year against soybean oil have since readjusted to a more
typical premium. The season average corn oil price strengthened to 19.1
cents per pound compared with 13.75 cents in 2000/01.
Imported Oils
World coconut oil output fell 10 percent in 2001/02 to 3.3 million metric
tons. U.S. imports of coconut oil were 1,150 million pounds in 2001/02, up
35 million from the previous year. In anticipation of a downturn in global
production lasting into 2003, importers were probably taking advantage of
favorably low prices early this year to secure larger stocks. The U.S.
import unit value for coconut oil declined from $361 per metric ton in
2000/01 to $327 in 2001/02. For palm kernel oil, the other main lauric
oil, U.S. imports in 2001/02 fell to 330 million pounds from 364 million in
2000/01. But, total supplies of palm kernel oil were higher because of an
ample level of beginning stocks. A recovery in domestic disappearance from
a low 2000/01 pace was possible because of the larger supplies.
Lower import costs for palm oil encouraged a 25-percent increase in
domestic disappearance to 481 million pounds. U.S. palm oil imports were
raised in 2001/02 to 505 million pounds from 399 million in 2000/01.
Tightening world stocks had rallied import values later in the summer but
the bulk of 2001/02 imports were received before June.
World output of olive oil increased just 2 percent in 2001/02 to 2.5
million tons, largely due to a surge in Spanish production. However,
shrinking stock levels and a sharp cut in both olive oil production and
exports by Turkey and Tunisia contributed to stronger world prices. A
weakening of the dollar relative to the euro in 2002 also made U.S. imports
more costly. U.S. olive oil imports totaled 465 million pounds in 2001/02,
only slightly less than the 468 million imported a year earlier.
Animal Fats
Domestic output of edible tallow expanded 6 percent in 2001/02 to 1,920
million pounds. The price of edible tallow had sunk to a low 12.5 cents
per pound in January but strengthened above 15 cents by the summer. The
2001/02 average price was 13.9 cents per pound, up from 13.4 cents a year
earlier.
Foreign imports of edible tallow were encouraged in 2002 by rising world
prices for competing products. For example, tallow is a chief substitute
for palm stearin in the production of stearic acid, which is used for
manufacturing rubber. Output of beef tallow in Europe has not yet
recovered from its outbreak of mad cow disease 2 years ago. U.S. tallow
exports mushroomed to a record 475 million pounds compared with 338 million
in 2000/01. Mexico, traditionally the largest importer of U.S. tallow,
accounted for most of the increased shipments. In contrast, domestic
consumption of edible tallow declined 35 million pounds to 1,464 million.
Production and demand for lard were quite stable in 2001/02. Lard output
increased 3 percent to 1,080 million pounds, while domestic disappearance
edged 3 percent higher to 989 million and exports slipped 2 percent to 90
million pounds. A summer rally was not sufficient to counter low prices in
the first 3 quarters of the marketing year, causing the season average lard
price to weaken to 13.6 cents per pound compared with 14.6 cents in
2000/01.
World Oilseed and Protein Meal Situation
Foreign Exchange Developments Shape World Oilseed Trade
World oilseed production increased to 323.1 million metric tons in 2001/02,
from 313.4 million the previous year. Most of the oilseed gain came from
an expansion in global soybean production, which rose to 183.8 million tons
from 175.1 million in 2000/01. The United States accounted for 42 percent
of the worlds output gain. Despite smaller absolute increases in
Argentine and Brazilian production, both countries accrued much of the
gains in world soybean and soybean meal trade. Global soybean exports
expanded from 55.1 million tons in 2000/01 to 55.4 million in 2001/02,
while soybean meal exports grew from 41.1 million tons to 45.1 million.
For Brazilian farmers, soybeans have been a very good hedge against
volatile fluctuations in their nations currency. Despite relatively weak
soybean prices in dollar terms, Brazils exchange rate (which depreciated
by one-fourth against the dollar in 2001) supported internal soybean prices
and plantings in 2001/02. Brazilian corn prices were not as attractive as
they were in 2000, causing a higher soybean-to-corn price ratio to create a
substantial shift between corn and soybean acreage in 2001/02. Farmers
locked in favorable domestic prices with a large number of forward sales
and Brazils government also increased its farm credit by 30 percent to
plant 2001 crops. In response to these factors, Brazilian soybean area
swelled to 16.35 million hectares in 2001/02, compared with 13.9 million
hectares in 2000/01.
Growing conditions were largely favorable in each of Brazils major
producing states. The national average yield also benefited from the
expansion of soybean area in the high-yielding states of the Center-West.
Late in January, heavy rains eased a drought in the southern states of Rio
Grande do Sul and Santa Catarina (which account for about 20 percent of
Brazilian soybean area), although some yield damage remained. Soil
moisture conditions elsewhere in Brazil were quite favorable. The national
average yield also increased as most of the area change was attributed to
the high-yielding states of the Center-West. Brazilian soybean output
reached a record 43.5 million tons in 2001/02.
Despite a bumper harvest and bigger than usual soybean carryover, Brazilian
soybean exports slipped to 15.0 million tons from 15.5 million in 2000/01.
Between December and March, impending new crop supplies and Chinas sudden
suspension of imports depressed Brazilian soybean prices. Farmers locked
in relatively high prices last year on a portion of the crop with forward
sales and were well capitalized to wait for better post-harvest returns.
Better prices reappeared by fall 2002 when doubts about Brazils ability to
service a large public debt weakened its exchange rate to a record low 4.0
reals per dollar. Threats to U.S. crop also contributed to the price
rally. Between March and August 2002, soybean prices in local currency
surged 75-80 percent. Yet, by the end of September the postponement of
export shipments created an unusually large level of stocks.
Greater availability of domestic soybean supplies and an easing of the 2001
energy shortage sparked a brisk increase in Brazilian crushing to 24.7
million tons. The production growth helped revive Brazils soybean meal
exports from 10.7 million to 11.3 million tons; however, they were
constrained by robust domestic use. Brazils own consumption of soybean
meal increased 8 percent in 2001/02 to 8.2 million tons, with particularly
strong growth in poultry production.
Export Taxes Temper Farm Benefits from Argentine Currency Devaluation
Brazil was not the only country where exchange rates affected production
incentives. In June 2001, Argentinas government modified its fixed
exchange rate regime because of difficulty paying off foreign debt.
Instead of being pegged one-to-one to the dollar, the peso was based for
importers and exporters on a half dollar-half euro rate. At the time, the
policy amounted to an 8-percent devaluation on export commodities based on
convertibility of approximately 0.84 euros to the dollar. Although the
depreciation was less acute than what Brazil had experienced with its
floating exchange rate, agricultural commodity prices in Argentina
subsequently gained and farmers made plans to expand planting of oilseeds.
Between September and November 2001, excess soil moisture and localized
flooding in Argentina stalled planting for corn and sunflowers. The rains
abated during December and soybeans (which can be planted later than the
other crops) gained even more farmland than first anticipated. Argentine
soybean area expanded to 11.3 million hectares in 2001/02 from 10.4 million
the previous year.
During February 2002, a dry spell developed throughout Argentina. But by
mid-March, rains returned to benefit most second-crop soybeans during their
main pod filling stage, as well as some of the first crop soybeans that
were planted later than usual this year. Late maturity of the crop,
frequent rains in April and May, and diesel shortages slowed completion of
the harvest. Nonetheless, Argentinas soybean output increased to 29.5
million tons from 27.8 million in 2000/01.
The Argentine peso had formerly been pegged since 1991 at a one-to-one rate
to the U.S. dollar. But in December, Argentinas default on its large
public debt forced a controlled devaluation starting January 6, 2002, of
28.5 percent for export and import transactions. Devaluation instantly
improved Argentinas competitiveness of producing exportable agricultural
commodities and their returns from even marginal cropland. Yet, about 94
percent of farmers intended soybean acreage had already been sown before
the official devaluation date in early January. Producers view dollar-
based soybeans as a hard asset with a superior store of value, and many
likely anticipated devaluation, planting as many soybeans as they could.
Prior to devaluation, forward marketing of new-crop soybeans was
negligible, and there was little old-crop left to sell.
The exchange rate was allowed to float for other transactions, which
depreciated to 1.7 pesos per dollar in initial trading. Government
officials indicated that the peso might be allowed to float within 4-5
months for foreign trade, approximately at the time farmers would harvest
their new crops. Even if Argentina had been able to defend the new
exchange rate in the interim, farmers would have postponed marketing. Many
small farms were insulated from the need to immediately service debt,
because the government converted dollar-based bank loans of less than
$100,000 into pesos at a one-to-one rate.
In February, the Argentine Government accelerated its plans to eliminate
exchange rate controls by allowing the peso to float freely. Transfers of
export earnings by multinational companies were still severely restricted,
however. The action ended the dual exchange rate for exports that was
fixed at 1.4 pesos to the dollar in January. The exchange rate
differential for exporters (based on a half-euro and half-dollar rate),
implemented in 2001, was also abolished.
By itself, the devaluation should benefit agricultural exports in the long
run. But commodity exchanges in Argentina were virtually shut down between
late December 2001 and March 2002. Oilseed exports briefly ceased because
of uncertainty about the governments repayment of value-added taxes (VAT)
owed to agricultural exporters. Exporters of oilseeds and oilseed products
are required to pay a 21-percent VAT. When the shipment is loaded, the
government is legally obligated to refund a portion of the tax to the
exporters. But, the exporters were owed VAT refunds of about $600 million,
as well as an additional $100 million from the special exchange rate
program. The government proposed to settle the debts through a series of
19 monthly installments beginning in March. A resumption of agricultural
exports was hoped to stabilize the pesos value, and the government may
eventually consider a reduction in the VAT to further encourage them.
Nevertheless, the Government converted all dollar-denominated debts
(including the delinquent value-added tax refunds) into pesos at a one-
peso-per-dollar rate. This forced exporters to absorb more than $300
million in foreign exchange losses on the tax rebates. In addition, all
dollar deposits in Argentine banks were converted at a 1.4-peso-per-dollar
rate instead of the rapidly depreciating market rate. Exporters and
oilseed processors passed on part of their huge losses to Argentine farmers
through greater price discounts for their commodities, diminishing the
immediate advantages from the devaluation to them.
Argentina imposed export taxes on agricultural products in the 1980s, but
mostly abandoned them in 1991, retaining only a modest 3.5 percent tax on
oilseeds. In addition, a portion of the domestic value-added taxes on
oilseed products was rebated to exporters. This policy contributed to the
countrys decade-long expansion of agricultural production and exports.
But in March 2002, the Government of Argentina raised the tax on oilseed
exports to 13.5-percent and added a 5-percent tax on exports of oilseed
meals and vegetable oils. At the time, the 8.5-percent tax differential
would have provided soybean processors an advantage of $10-$15 per ton over
exporters. This differential was narrowed in April when the taxes were
hiked again to 23.5 percent for oilseeds and 20 percent for oilseed
products. To help moderate domestic food prices, the more favorable
differential for vegetable oils and oilseed meals was retracted from
processors. The agricultural export taxes were intended to raise about $3
billion annually for the cash-pressed treasury.
The exchange rate in October 2002 averaged 3.6-3.7 pesos per dollar, a 72-
percent devaluation since January 1. By September, this led the soybean
price in Rosario, Argentina up more than 400 pesos per ton (325 percent).
However, export taxes and capital controls moderated the pace of export
gains for oilseeds. To support its banking system, Argentina also imposed
barriers on the repatriation of dollar earnings. And, the Argentine
central bank required exporters to exchange their dollars for pesos within
5 days of a sale. Yet, for some distant buyers (such as China), it can
take up to 6 weeks after leaving port for an exporter to get paid. In
effect, the exporters provided mandatory loans to the government.
Previously, exporters had up to 180 days for oilseed products and 15 days
for oilseeds. With the multinational grain companies compelled to finance
their own trade, such drains on their cash flow prevented a quicker
recovery in Argentine oilseed exports. The government also revised a
policy for converting dollar loans for agricultural inputs. Farmers must
now repay the loans at the current market exchange rate instead of the
former one-peso-per-dollar rate. Argentine farmers lost a $2 billion
foreign exchange windfall by the revision. However, the revision may have
prevented an even worse outlook for the financing of 2002 crop planting.
In mid-April, Argentinas Government decreed that the export taxes be
applied on sales retroactively to March 4 and subsequently assessed at the
time of shipment instead of the time of sale. Oilseed exporters ceased
trading after this announcement because profits on their unshipped sales
were wiped out, and the possibility of higher future export taxes made
profits for new trades impossible to ascertain. As a result of this
standstill, the government rescinded the policy a week later. Then a week-
long closure of the banking system halted export sales, as exporters could
not price commodities without an exchange rate. For several days, some
farm organizations protested against rumors of even higher export taxes by
suspending their crop sales. To encourage oilseed deliveries, exporters
offered producers the opportunity to deliver sales immediately after
harvest and defer pricing (with no discounts for storage) until August.
Argentine farmers reluctantly sold their newly harvested crops to protest
high export taxes, fuel costs, and inequitable treatment of farm debt.
Argentine farmers also waited to see whether the peso stabilized or if
rising U.S. prices continued. Trucker strikes also complicated
transportation of crops. Without farm sales, Argentine exporters had
little to sell abroad. Thus, the government was unable to quickly reap tax
payments from agricultural exporters, the leading source of tax revenue.
The International Monetary Fund has yet to restore lending to the country.
Having few financial resources, the government suspended promised rebates
of delinquent value-added tax to exporters. This hurt the ability of
processors to expand output so they could not afford to offer farmers any
better prices for their crops. Until more summer crops are sold, farmers
have little cash to pay off debts and buy new inputs for planting 2002
crops.
A slowdown in Chinas soybean purchases only compounded the problems for
Argentine exports. In 2000/01, China accounted for two-thirds of
Argentinas total soybean exports and nearly three-quarters of its exports
between April and July. Even with a crop size 1.7 million tons larger than
the previous years, the standoff between suppliers and the government
reduced Argentine soybean exports for 2001/02 to 6.3 million tons from 7.4
million in 2000/01. Consequently, end-of-September stocks accumulated to a
record 9.8 million tons.
Higher soybean oil prices aided a strong increase in Argentine soybean
crushing to 20.5 million tons from 17.3 million in 2000/01. Growth in
soybean meal exports (from 13.6 million to 15.7 million tons) also
followed.
In India, a good first round of monsoon rains in 2001 produced a recovery
from the droughts that afflicted oilseed production in the previous 2
years. Improved prices encouraged Indian farmers to expand soybean area
about 3 percent in 2001 to 6.0 million hectares. With a recovery in yield
to its yearly trend, Indian soybean output bounced back to 5.4 million tons
from 5.25 million a year earlier. Higher supplies restored 2001/02 Indian
soybean meal exports to 2.45 million tons.
Chinas Policy on Biotech Imports Stalls Trade
In China, comparatively attractive corn prices in 2001 kept soybean area
unchanged at 9.2 million hectares. Rains in the last half of June eased a
spring drought in the North China Plain. But the moisture largely missed
Heilongjiang, the top soybean-producing province, which again led to
disappointing yields. Soybean production by China in 2001 equaled the
previous years output of 15.4 million tons.
On June 6, 2001, China's Government announced a policy requiring a
quarantine of imported biotech crops until a safety certificate was issued
for it. However, at the time China provided few details on who would
provide the certification or what criteria would guarantee approval. The
regulation allowed a certification review period of up to 270 working days.
Purchases made prior to the June announcement were exempted, but most
imports had already arrived. Although no soybean shipments were rejected,
traders were reluctant to book new deliveries because of uncertainty as to
when or whether the cargoes would be discharged. Major delays (up to 30
days) for vessels at the port impose an onerous financial penalty on
importers.
China had huge soybean stocks left over from their 2001 buying spree and
their own domestic harvest. Because prices were low for Chinese farmers,
their government did not hurry to clarify the regulations. Exporters
requested that China at least adopt a retroactive grace period, allowing
imports to arrive until a complete set of import regulations was developed.
On January 7, the Government of China announced new details of its import
policies for transgenic products, which were first issued in June 2001.
The new policy mandated that after March 20 every foreign shipment of
biotech products must apply for a safety certificate from the Ministry of
Agriculture (MOA), including a government statement from the originating
country that it poses no harm to humans, animals, or the environment.
Labeling would apply to biotech oilseeds as well as their processed
derivatives such as soybean meal, soybean oil, rapeseed meal, and rapeseed
oil. Sales can be made only after the certificates are issued. Upon
arrival the imports must be quarantined while inspections are conducted to
verify the presence of any genetically engineered material, as well as
diseases or other impurities.
Yet, specific information required from the applications for safety
certificates was still ambiguous. Some of the data requested was available
only from a biotech seed developer. And, with no explicit specification of
a tolerance level, Chinas labeling regulations would have effectively
established a zero-tolerance limit, similar to standards imposed by South
Korea and the European Union. Zero-tolerance means that the presence of
any genetically engineered commodities would have to be labeled and subject
to the safety certificates. Current testing equipment can detect the
presence of altered proteins within 0.01 percent. In 2001, biotech
varieties accounted for 68 percent of the soybeans grown in the United
States and 88 percent in Argentina.
Despite the absence of an official Brazilian sanction of transgenic
soybeans, buyers in China also cancelled purchases from Brazil for April-
May shipment. A zero-tolerance standard would apply to the traces of
biotech soybeans that can be found in many Brazilian exports. The risk of
having any unlabeled imports testing positive would be quite costly,
because without a safety certificate they would be returned or destroyed.
Thus, it would have been practically impossible for Brazilian exports to
get the required safety certificate from China if the shipments were not
identity-preserved.
Initially, the MOA would accept no applications until March 20, and the
deadline for the first submission was March 31. The next opportunity for
applications would not have been until September 30. Authorities were
allowed up to 270 working days for each approval, with the inspection
itself adding another month to the process. Shortly after the January
announcement, exports of U.S. soybeans surged as Chinese processors rushed
to secure delivery before March 20.
In March, China agreed to ease implementation of the regulations (on a
transitional basis through December 20) on biotech crop imports. After
March 20, China provided preliminary safety certificates to importers
within 30 days of receipt of required documents. Nonetheless, there was a
temporary halt in the orderly movement of foreign oilseed products to
China. Soybean shipments to China resumed while the Ministry of
Agriculture considered the safety certificate applications for transgenic
soybeans.
Despite Chinas temporary resolution for biotech soybean imports, its
pipeline of foreign shipments had been cut off. Foreign trade surged in
March ahead of the safety certificates implementation, but only a trickle
of imports had been ordered for April-May delivery (compared to 2.7 million
tons for those 2 months in 2001). Many exporters subsequently received
interim safety certificates that swelled the number of soybean shipments to
China again. The original interim period was set to expire on December 20,
which was recently extended to September 20, 2003.
The interruption caused Chinas 2001/02 soybean imports to drop to 10.3
million from 13.2 million tons in 2000/01. Soybean meal imports by China
also fell to just 30,000 tons. In fact, despite a tighte
